PERSPECTIVE3-5 min to read

Asian credit: where are the investment opportunities?

Post-Covid recovery in the Greater China region is presenting opportunities in the internet platforms, Macau gaming, airports and retail-oriented companies. We also see opportunities in Indian renewables and infrastructure.


Key drivers of Asian credit so far in 2023

Credit markets have been on a rollercoaster ride since the start of 2023. Just as we thought the rebound in credit markets had legs to run, global banking stresses in March erased all spread tightening year-to-date and led to a re-think of the US Federal Reserve’s rate hike trajectory. While Asian credit spreads have widened in line with global volatility, the region has held up strongly, up almost 3.5% on a year-to date basis.

Fixed Income asset class returns YTD chart as at May 2023

Globally, there are a number of issues keeping fixed income investors on edge: US debt ceiling concerns, US Federal Reserve’s rate hike uncertainties and US bank stresses.

However, against a backdrop of slowing global growth, Asia stands out as a bright spot and is positioned strongly relative to the global economic cycle. The region is poised to contribute to majority of the global growth this year, driven by tailwinds from China’s reopening story and firm economic outlook for major economies such as India and Indonesia.

Where are we seeing the most interesting Asian credit opportunities?

Mainland China has shown to be well on track in its post-Covid recovery, with Q1 2023 GDP coming notably above consensus at 4.5% year on year, largely boosted by travel-related consumption. A supportive policy stance also caps further downside risk to the Chinese economy. These developments are likely to benefit several segments in the Greater China region, such as internet platforms, Macau gaming, airports and retail-oriented companies.

Separately, we see several interesting credit stories in Indian renewables and infrastructure. Overall healthy macroeconomic outlook and robust domestic demand, along with a stable regulatory environment, help create a benign backdrop for these issuers to operate. These developments should help anchor credit fundamentals especially within investment grade, and support the outperformance of quality credits in the region.

Apart from the aforementioned markets, high quality Hong Kong SAR and Korea issuers also present ample opportunities for credit selection.

For illustrative purposes only and does not constitute to any recommendations to invest in the above-mentioned security/sector/country.

Important information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored.


Follow us

Schroder International Selection Fund is referred to as Schroder ISF throughout this website.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.

Schroder Investment Management (Europe) S.A. is subject to the UCITS law of 17 December 2010 and the AIFM law of 12 July 2013.